About the REIT FFO Calculator
Funds from operations (FFO) is the earnings measure real estate investment trusts report alongside GAAP net income. Net income subtracts depreciation on buildings, but well-maintained real estate usually does not lose value the way a machine does, so FFO adds real estate depreciation and amortization back, removes gains or losses from selling properties, and adds back impairment write-downs on real estate. The result is a cleaner view of the recurring cash earnings that pay REIT dividends.
Adjusted FFO (AFFO) goes one step further by subtracting recurring capital expenditures needed to keep the properties competitive — roofs, HVAC, tenant improvements and leasing commissions — and removing non-cash straight-line rent. Divide either figure by diluted shares to get per-share numbers, and divide the share price by them to get P/FFO and P/AFFO, the REIT equivalents of a P/E ratio.
Enter figures from a REIT’s income statement and supplemental package in any consistent unit (for example, everything in millions, including the share count). AFFO definitions differ between companies, so use the same method when comparing REITs, and treat this as an analysis aid rather than investment advice.
With the default inputs, the ffo per share is $2.90. Change any value above to recalculate instantly.
How to use the reit ffo calculator
- 1Enter net income and real estate depreciation from the REIT’s financial statements.
- 2Enter gains on property sales (negative for losses) and any impairment write-downs.
- 3Add recurring capex and the straight-line rent adjustment for AFFO.
- 4Enter diluted shares in the same unit as the dollar amounts.
- 5Add the share price and dividend to see P/FFO, P/AFFO and the payout ratio.
Formula and method
FFO follows the industry definition popularised by Nareit: start with GAAP net income, add back depreciation and amortization related to real estate, exclude gains and losses from selling depreciable property, and add back impairment write-downs of real estate. Losses on sale should be entered as a negative gain so they are added back.
AFFO is not standardised. This calculator uses the common approach of subtracting recurring capital expenditures (including tenant improvements and leasing commissions) and the straight-line rent adjustment, which is rent recognised under accounting rules but not yet received in cash. Per-share figures divide by diluted shares, and price multiples divide the share price by those per-share figures. Use the same units for every amount and the share count.
- D&A
- Depreciation and amortization of real estate assets
- AFFO
- Adjusted funds from operations
- P/FFO
- Share price divided by FFO per share
Worked examples
Large REIT (figures in millions)
$450M of net income plus $320M of depreciation, minus $60M of gains, plus $15M of impairments gives FFO of $725M, or $2.90 per share on 250M shares. Subtracting $70M of recurring capex and $20M of straight-line rent leaves AFFO of $635M ($2.54 per share). At $55 the stock trades at 19.0× FFO, and the $2.40 dividend is 94.5% of AFFO.
Smaller REIT with no property sales
Net income of $80M plus $95M of depreciation gives FFO of $175M, or $4.38 a share. After $24M of capex and straight-line rent, AFFO is $3.78 a share. A $32 share price is only 7.3× FFO, and the $2.10 dividend is a comfortable 55.6% of AFFO.
Big gain on sale inflates net income
Removing the $400M one-time gain and adding back $900M of depreciation and $50M of impairments gives FFO of $1,750M, or $2.92 per share — a 24× multiple at $70. AFFO is $2.60 per share, so a $3.60 dividend is 138% of AFFO and not covered by recurring cash flow.
Frequently asked questions
What is FFO for a REIT?+
Funds from operations is net income with real estate depreciation and amortization added back, gains or losses on property sales removed, and real estate impairments added back. REITs report it because GAAP depreciation understates the earning power of well-maintained property.
What is the difference between FFO and AFFO?+
AFFO starts from FFO and subtracts recurring capital spending needed to maintain the properties, such as tenant improvements and leasing commissions, and removes non-cash items like straight-line rent. It is closer to distributable cash flow, but each REIT defines it slightly differently.
What is a good price-to-FFO ratio?+
There is no single good number. P/FFO varies by property sector, growth and interest rates, so compare a REIT with peers in the same sector and with its own history. A lower multiple can signal value or higher risk.
Why is depreciation added back in FFO?+
Accounting rules depreciate buildings over decades as if they steadily lose value, but real estate often holds or gains value when maintained. Adding depreciation back gives a more realistic picture of operating performance; AFFO then deducts the actual recurring capital spending.
What is a safe REIT dividend payout ratio?+
Many analysts prefer the dividend to be below roughly 80%–90% of AFFO so the REIT retains cash for upkeep and growth. A payout above 100% of AFFO means the dividend is being funded by something other than recurring cash flow.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.